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Contents:

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Welcome to GOL Airlines' Fourth Quarter 2017 Results Conference Call. This call is being recorded and all participants will be in a listen-only mode during the company's presentation. After GOL's remarks, there will be a question and answer session. At that time, further instructions will be given. Should any participant need assistance during this call, please press *0 to reach the operator. This event is also being broadcast live via webcast and may be accessed through the GOL website at www.voegol.com.br/ir and the MCIQ platform at www.MCIQ.com where the presentation is also available. Participants may view the slides in any order they wish. The replay will be available shortly after the event is concluded. Those following the presentation via the webcast may post their questions on the platform. Then their questions will either be answered by the management during this call or by the GOL Investor Relations Team after the conference is finished.

Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of GOL's management and on information currently available to the company. They involve risks and uncertainties because they relate to future events and therefore depend on circumstances that may or may not occur. Investors and analysts should understand that events related to macroeconomic conditions, industry, and other factors could cause results to differ materially from those expressed in such forward-looking statements. At this time, I will hand you over to Paulo Kakinoff. Please begin.

This morning, we released our Q4 [inaudible]. After, it will be made available on GOL's Investor Relations website. Three videos, a repeat presentation, financial review, and [inaudible]. We hope this allows you a better understanding of our quarterly results at the moment we discover our [inaudible] release. Our hope is formally to give much more time in the conference call for questions and answers. Before beginning, I would like to highlight that we have significantly improved all indicators in the fourth quarter of '17. GOL's RPK increased by 8% from 9.3 billion in the fourth quarter '16 to 9.9 billion in the fourth quarter 2017. Mainly due to a 6.2% increase in the number of passengers. [Inaudible], the demand [inaudible], it's considered the [inaudible]. Average yield per passenger increased by 2.1% in this quarter compared to fourth quarter 2016 reaching 26.36 cents of Real. [Procedural?] remains conservative with the ASK increasing 3.5% compared to the Q4 '16.

[Inaudible] a 1.6% increase in pickups and a 1.8% [big lap] expansion. As a result, the average load factor in the fourth quarter grew 3.4 percentage points compared to the periods of 2016 reaching 81%. For the full year 2017, [hours per day?] increased by 3.6% primarily due to a 4.8% rise in [inaudible] with yield growing by 2.2%. ASK increased by only [inaudible]%. Load factor, we are 39.4%, 2.2 percentage points increase compared to 2016. GOL remains the industry leader in flights in quality. We are at 92.5% of flights on-time in fourth quarter. And 94.6% in 2017 according to [inaudible]. We continue to have a strong revenue growth. The combination of higher demand and [inaudible] resulted in net revenue for the quarter of R$3 billion, an increase of 11.8% quarter over quarter. For the full year 2017, revenue was R$10.6 billion, 7.2% higher than the prior year. GOL's current 2018 guidance is for net revenue of what outlooks will be R$11 billion. Our network serves higher yielding routes and has a medium share in the corporate flight segment.

We have currently the largest share of business traffic in the country. And we are optimistic about our prospects as the economy increases demand [inaudible]. We also remain committed to providing the best overall work travel experience. We designed our amenities to provide [inaudible] and interconnectivity. As well, there's also a marked number of flights in the main business destinations. This January, we've started selling tickets for GOL's four routes between Brazil and the United States from Brasilia and Fortaleza to Miami and Orlando. With that, I'm going to hand you over to Rich. He is going to take us through some more highlights.

Richard Lark -- Chief Financial Officer

Thanks, Kaki. First, we'd like to comment about our controlled cost environment. Total CASK in the quarter was 21.21 cents in Real. Just 1.4% higher than the same period of 2016. In spite of a less benign fuel environment, GOL remains a cost leader in South America for the 17th consecutive year. And our margins continue to expand. GOL's even margin continued to expand reaching 13% in the fourth quarter of 2017. Which is the highest fourth quarter indicator since 2011 and a 5.6 percentage points improvement over the same period in 2016. Operating income -- EBIT -- in 4Q '17 was R$388 million. An increase of 96% quarter over quarter. For the full year of 2017, even marginal was 9.4%, which was a growth of 2.3 percentage points compared to 2016. And operating income reached R$1 billion. GOL's current 2018 guidance is for an even margin of approximately 11%. EBITDA margin was 17.8% in 4Q '17 and 14.1% in 2017. A growth of 5.8 percentage points quarter over quarter and 2.5 percentage points year over year. EBITDA margin was 25.5% in 4Q '17 and 23% in 2017. An increase of 9 percentage points quarter over quarter and 1.3 percentage points year over year.

Operating cash flow generation was strongly positive by R$630 million with a record operating cash flow margin of 21%. Our highest since 2011. And for the full year 2017, GOL had an operating cash flow of R$1.7 billion with a 16% operating cash flow margin. On page 11 of our press release, we provided a summary of operating cash flow. Which helps you all reconcile that from the financial statements where there are two major adjustments. One is that in the financial statements from our [inaudible] perspectives, financial investments in cash securities are out of the operating cash flow. That needs to be added back. And also, as you know, GOL's in the final phase of heavy engine overhauls which are capitalized. And those are excluded from suppliers payable and put into the net investment line or the CAPEX line where we had approximately R$362 million in the fourth quarter of 2017. And so that reconciliation is provided for you on page 11 of the company's press release. And to finalize this brief review, we wanted to share the highlights of our balance sheet strengthening.

The net debt -- excluding perpetual bonds -- the last 12 months, EBITDA was 3.0 times in 4Q '17. Improving both versus the 3Q '17 where it was 3.4 times and the 4Q '16 when it was 4.2 times. Total liquidity -- including cash, financial investments, restricted cash, and accounts receivable -- totaled R$3.2 billion. Which is an increase of 51% versus September '17 and an increase of 66% versus December '16. The combinations of GOL's credit rating upgrades, successful notes offering, tender offers and redemptions, and improved cash liquidity substantially increased the company's financial flexibility while decreasing its blended cost of debt and increasing the average maturity of the company's indebtedness. On January 30, 2018, our GOL subsidiary, GOL Finance, priced an additional issue. A retap offering in the amount of $150 million of senior notes due 2025 with a coupon of 7% per year.

Regarding guidance, we expect to close 2018 with 1-3% growth in domestic ASKs over 2017. We projected a load factor of 79-80%. And Ex-fuel CASK of around 15 cents of Real. EBITDA and EBITDA margins in 2018 are expected to be around 16% and 11% respectively. Earnings per share are expected to be between R$1.20 and R$1.40. Earnings per ADS are expected to be between 75 cents and 90 cents on the dollar. For 2019, on a preliminary basis, we expect domestic capacity growth to be between 1-3% and non-fuel CASK to remain stable in relation to 2018. EBITDA margin is expected to be around 18%. And leverage is expected to be approximately 2.5 times. Now, I'd like to return the mike over to Kakinoff.

Paulo Kakinoff -- Chief Executive Officer

Thanks, Rich. We expect to continue to thrive in our efficiency and technological developments this year. We are configuring our terms with [inaudible] from 177 seats to 108 seats as well. And incorporating the new Boeing 737 MAX 8 in the second half of 2018. With a range of up to 6.5 thousand kilometers, the new 737 MAX 8 aircraft will allow GOL to offer nonstop flights from Brazil to any destination in Northern America. As well, [inaudible] recently announced its destinations in Florida. We remain focused on offering the best experience in [inaudible]. Providing extremely good service to our customers on new, modern aircraft that connect our main market with the most [inaudible]. Over 100 aircraft in our fleet have already been retrofitted with eco-leather seats. And more than 80 have on-board Wi-Fi and live TV. Our entertainment [inaudible] is the most complete and modern in Latin America and also offers a free entertainment catalogue.

We also offer our customers selfie check-in, GOL Conforto seats, and an extraordinary meal of on-board products while remaining a low-fare leader. To conclude, I would like to mention again that we made available on GOL's Investor Relations website three videos for [inaudible] presentation, financial review, and [inaudible] Q&A. As well as the full presentation and the earnings release. I want to say we'd highly appreciate your feedback of these new things being available. We hope these will provide a better understanding of our quarterly results. In addition, this format will give us much more time on the conference call for the questions and answers as we've got at this moment.

Questions and Answers:

Operator

Thank you. The floor is now open for questions. If you have a question, please press * then 1 on your touchtone phone at this or any time. If at any point your question is answered, you may remove yourself from the queue by pressing * then 2. Questions will be taken in the order they are received. We ask that when you post your question, that you pick up your handset to provide optimum sound quality. Please hold while we poll for questions. The first question comes from Michael Linenberg of Deutsche Bank. Please go ahead.

Catherine O'Brien -- Deutsche Bank -- Analyst

Good morning, gentlemen. It's actually Catherine O'Brien filling in for Mike. Thank you for sharing that 2018 and 2019 operating margin guidance. It's very helpful to put some context around what you're seeing for the next couple of years. Can you talk about if we should view 2019's 13% operating margin as a normalized level? Or are you expecting to see further improvement from there? Any color on your view of what GOL's average margin should be over the cycle would be really helpful. Thank you.

Richard Lark -- Chief Financial Officer

Yeah, I could. Well, the numbers we gave you, that's management guidance. You can use that as you see fit. But that's based on what we see. I'm not sure if I understood your question. But in terms of averages and so on, the company has recovered substantially its margins in 2017, as you can see. And we gave you guidance for '18. And that looks like basically what we see in terms of the combination of what we're planning on doing with our network specifically. But keep in mind, in 2019, we also start to get a larger portion of our fleet with the 737 MAX 8's, OK? They start coming in in July of this year. But it's a timid impact. But the MAX 8 for us in our figures, it's kind of like a double whammy for our economics. We get about a 3-4% annual cost reduction as we feather that into our fleet on the cost side. Mainly deriving out of the lower fuel consumption on the MAX -- 15% lower fuel consumption. But also, we get greater revenue productivity.

So, we also get a hit above the line, if you will, on the revenue side. Not just on cost, but also on revenues because of the greater productivity of the MAX. Not just in terms of a larger seat configuration. But also, in terms of what we expect in utilization, increase in average stage lengths. As you know, the MAX -- in addition to the 15% fuel economy on the cost side, it also has an average stage length of another thousand kilometers. Which allows us to increase revenues and is a key driver for us being able to add the Florida and international destinations that we're adding. So, it's a combination of those factors in addition to what we expect in terms of the overall macroeconomic environment that's really behind those numbers that we're providing to you on guidance. But that's based on what we can see into the future at this point.

Catherine O'Brien -- Deutsche Bank -- Analyst

Okay. Understood. Thanks a lot. I just meant are you thinking that 13% is peak margins? Or do you think the next five or ten years, you're going to average something more like 15%? Just kind of how you think about that longer term.

Richard Lark -- Chief Financial Officer

Yeah. We haven't provided any guidance on what peak margin would be. I think probably what you could do there -- given your guy's experience in the U.S. market and understanding of airline economics, kind of model that. In Brazil, we have a high concentration of business travelers. And in our network, we have an even higher concentration. We're the number one business airline in Brazil. So that gives us a relatively higher yielding traffic. But on top of the very same aircraft that you see companies like Southwest and Lion Air operating. You guys know those economics of Southwest and Lion Air very well. And I think mainly on the revenue side, I would say this is -- Brazil and especially in our network and our business, we have a very high component on the business travel, the corporate travel. Which is a higher yielding traffic cluster.

What I was just trying to say is that the key driver for us -- which is really the competitive advantage for GOL -- is what we're doing with the MAX aircraft. But you have now 17 years of history of GOL to kind of see where margins could go. Obviously, a key driver to that is also going to be solid capacity management. But that's what I would add in terms of contextualizing that.

Catherine O'Brien -- Deutsche Bank -- Analyst

Understood. Thanks. If I could just sneak one more quick one in. For your new service in Orlando and Miami, are you able to schedule those flights in a way to create connection opportunities with Delta to other U.S. destinations?

Richard Lark -- Chief Financial Officer

Yeah, of course. That's part of the partnership that GOL has with Delta is to -- not just on the Brazil side in Guarulhos and Galeao and airports in Brazil. But also, on the U.S. side to through connections with Delta through our partnership with them.

Catherine O'Brien -- Deutsche Bank -- Analyst

Okay. Thank you for the time.

Operator

The next question comes from Duane Pfennigwerth of Evercore ISI. Please go ahead.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Hey, thanks. Good morning. On the '18 capacity guidance, it's actually a bit less than what we were thinking. We were thinking more mid-singles. And it could just be that we were off base. But has your '18 capacity planning changed at all? Has it moderated a little bit? And then, can you give us any sense for the cadence of that by quarter?

[Crosstalk]

Paulo Kakinoff -- Chief Executive Officer

We [inaudible] on that and have developed and acquired a flexible way to observe capacity into a year. We are [inaudible] new travel opportunity through increased routes sustaining a higher load factor. And [inaudible] than expected. So, at the moment, we have been quite conservative regarding that. Because we don't know exactly how the [inaudible] the year will behave in this regard with the election period in Brazil and the [inaudible] connectivity. And coincidentally, it's possible [inaudible] for the East Coast destinations. So, what we have done so far is [inaudible] demand for the first quarter of the year. However, shortly we're going to [inaudible]. We are also pretty positive that the company has played a major role in keeping or influencing the capacity [inaudible] being a company as big as GOL is today. So, if we really have the right tools to quickly react, then that would be a key player in the chances [inaudible]. But it does not necessarily [inaudible] that we should do more [inaudible]. Richard, would you like to add something on this?

Richard Lark -- Chief Financial Officer

Yeah. Duane, I'll just add to that. Our plan is to grow domestic capacity GDP. And so, we're still feeling out the demand side of the equation here. We have the ability to increase that because we operate with a couple of aircraft that's subleasing that we can manage to bring back some additional capacity to capture additional upside on demand. And also, as we bring in the MAX to our fleet, we have the ability to adjust capacity on the rest of the fleet by the configuration. And so, we have pretty good mechanisms on the upside to manage that as we feel out demand. Now, in terms of the quarterly, we're not providing quarterly guidance on capacity. But we're going to be getting five additional aircraft in our fleet starting in July. They're all being dedicated to these flights from Fortaleza and Brasilia to South Florida. So, they're in the international bucket. They're not going to be in the demand bucket. And so, that's what I would comment on that.

Duane Pfennigwerth -- Evercore ISI -- Analyst

That's great. And then as you analyze these international markets and Florida specifically and you look at the prevailing fares -- and of course, it's going to adjust to these capacity changes. But what could fares look like on those routes today? What would you expect yields to look like on those routes relative to your system averages today?

Paulo Kakinoff -- Chief Executive Officer

That's very promising, at the moment. In spite of the fact that we have a huge regional international use. We've done the ASPs and we have [inaudible] industry, not GOL only. The market are at least reacting quite positively. And the main reason for that is that basically, what the [inaudible] industry has done is to cap the capacity [inaudible] in 2015, 2016 with the Brazilian Real devaluation. So, at the moment, the current trend of adding two-digit capacity on international routes will be capped for 2018 and 2019. And it seems to be across [inaudible] movement regarding routes.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Thank you.

Paulo Kakinoff -- Chief Executive Officer

Thank you very much.

Operator

The next question comes from Savi Syth of Raymond James. Please go ahead.

Matt Roberts -- Raymond James -- Analyst

Good morning, gentlemen. This is Matt Roberts on for Savi. I apologize if I missed this, Richard, in the prepared remarks. But could you describe again what really drove those below-maintenance per ASK value in 2017? Is that the right level going forward? And then just additional color on the one-time item from the 4Q '16 rent per ASK? Again, sorry if I missed that earlier.

Richard Lark -- Chief Financial Officer

Yeah. GOL's fleet returns ended in April 2017. So, in the 4Q of '16, they were higher maintenance expenses per ASK based on aircraft returns. And those were not present in the 4Q of '17. So that's why you see the reduction -- a relative reduction in the quarter over quarter period.

Matt Roberts -- Raymond James -- Analyst

Okay. Great. Thank you for that clarification there. And turning then over to your 2019 guidance. Given that there's a large step within capacity growth in 2019, it's somewhat surprising that your non-fuel CASK is expected to be flat. Is that an assumption of higher costs going into more international markets? Can you just provide some additional color into your thinking there? That'd be great. Thanks.

Richard Lark -- Chief Financial Officer

Well, to answer your question, the 737 MAX 8 creates large cost reductions for GOL. Not only do we have the 15% fuel economy, we also have greater revenue productivity via the higher stage length. And so that's pretty much what's driving the revenue growth with stable CASK. I don't know if that was your question. But that's how I would answer it.

Matt Roberts -- Raymond James -- Analyst

Yeah. It wasn't the question. I was just saying that the capacity growth is stepping up from 2018 to 2019. I thought maybe there would be some additional scale of the growth there that could reduce CASK. Is that not the case?

Richard Lark -- Chief Financial Officer

Well, no. The domestic capacity growth is growing pretty much at the same rate. The larger growth in the capacity of single [inaudible] is being driven by the international component of that. You start to have a larger component of the business. As we bring in the 737 MAX 8, we're going to be going from around 15% of our total [inaudible] today outside of Brazil domestic to a little over 20. And so, that comes in. Yes, there is going to be a stage-length effect in there -- a slightly larger stage-length effect. You know, 1,000 kilometers on that 20% of the network that's being done in international flights. But that's in that non-fuel cost guidance that we've provided. It's in those numbers.

Matt Roberts -- Raymond James -- Analyst

Okay. Thank you.

Operator

The next question comes from Dan McKenzie of Buckingham Research. Please go ahead.

Dan McKenzie -- Buckingham Research -- Analyst

Hey, good morning. Thanks, guys. Richard, I'd just follow-up on that last question. I wonder if you can just provide some perspective on the relative profitability of international overall versus domestic. Is the international flying, is that opportunity? Should we think of that as a higher margin opportunity versus domestic? I just wonder if you can help us understand the dynamic on that part of the network.

Richard Lark -- Chief Financial Officer

Yeah, sure. No. The domestic Brazil business has higher margins than the international long haul. Our main international today is South America. And so, Argentina, and Southern [inaudible], and that part. We'll be heading with the MAX out of Fortaleza and Brasilia flights up to South Florida. The relative profitability on those flights on an isolated basis is lower than the profitability we get on our domestic network. We're the largest domestic carrier with the best position and the best markets. And that has kind of put us in a position to be the number one business airline. Last year, we even passed competition in the top of the line category. And so, we're dealing with very high-yielding traffic in Brazil. It's not to say that the international traffic is also not profitable. But it has a lower profitability than our pure domestic traffic in our network. Speaking specifically about our network specifically. I'm not talking generally about the market. I'm talking specifically about the GOL network.

Dan McKenzie -- Buckingham Research -- Analyst

Understood. And then, I guess just with respect to your comment on business travel, I wonder if you could just elaborate a little bit further on that. Because what we've seen over the past year is political volatility that it has driven foreign exchange volatility. But the business travel trends seem to have held pretty steady. And I'm just wondering if there's some additional thoughts that you could just share as we think about 2018, 2019. What are the key drivers? What are you seeing across your network?

Richard Lark -- Chief Financial Officer

Yeah. I'll start, and I'll flip over to Kakinoff to finish it. We're seeing the key driver of domestic demand in this recovery obviously is first, the corporate travel. And I would say since October or so of last year, we're seeing the domestic demand more or less track the GDP expansion. We've seen the domestic demand since then in the kind of 5% growth rate overall. I'll ask Kaki to compliment that.

Paulo Kakinoff -- Chief Executive Officer

[Inaudible] we happen to be inside the cage where [inaudible] combination of a [inaudible] GDP, a very low inflation rate for Brazilian [inaudible] 5%. Now also a low prime rate. So, at that point, it's a benign environment. Not only toward the airline, but for other businesses in Brazil. So that's the main reason why the business demand is growing so fast. And in complement to that, it is important to notice that GOL is offering at this moment by far the best product to these specific market segments. We have the [inaudible]. We are leading on the [inaudible] airports in Brazil. We have the largest number of [inaudible] seats in [inaudible]. And the product has some unbeatable experiences being offered. Such as more leg room to economy class seats, leather seats, the [inaudible], selfie check-in, and the combination of meals and live TV in the air. So, we are not only making the most out of this benign environment, but actually have improved the market share among the corporate travelers. And this is because we have been able to attract those customers from the competition to fly with our flights. [Inaudible] pretty much complement anything in our capacity. Even including Florida in our market share among these customers.

Dan McKenzie -- Buckingham Research -- Analyst

Ah, very good. Thank you. And if I can just squeeze one more in. And that's just tied to foreign exchange or FX sensitivity for 2018. I'm wondering what the FX sensitivity is for this year just holding all else constant? And then I'm wondering if you can share what the FX parameters are you're factoring in for the high end or low end of your 2019 outlook? If all else equal, at what point we can begin to worry about reaching the lower end of that 2019 outlook looking at FX alone.

Richard Lark -- Chief Financial Officer

Looking at FX is not -- we don't think like that. So, I'd have to actually come up with an alternative universe. In our business, we have a combination of oil prices and FX working together. And that's how we manage the business. And so, you necessarily have to have an assumption on oil to calculate the FX in Brazil. So, we're assuming that the correlations will continue to work together. We have almost a perfect negative correlation between oil prices and Brazilian local currency. Yes, we probably have -- we expect the currency to scale out at the current levels where we are right now through the rest of the year. And that's reflected in the guidance that we've provided you. And we start with fuel and we're working with fuel. Kind of working between $56 to $63. [Inaudible] down to that level and kind of being most of this year at the higher end of that range. Closer to the $63. So, I think what I just said there, that's real to figure out what our view is.

Having said that, if the correlations were to hold, statistically, we should see a Real at or below $3 Reais by the end of this year if we continue with oil prices in the low $60s. But you should see Brazilian currency in the low $3s or even perhaps as low as $2.95 by the end of the year if the historical correlations between oil and currency hold. Having said that, we expect oil to continue at this kind of level through this year and currency to kind of be bouncing around at the level that it is right now. That's kind of what's reflected in the images that we're sharing with you. But if you were to use the statistics, like I said, you should probably see Real closer to the $3 level plus or minus.

Dan McKenzie -- Buckingham Research -- Analyst

Yeah. Thanks for the time, guys. That's very helpful.

Operator

The next question comes from Petr Grishchenko of Barclays. Please go ahead.

Petr Grishchenko -- Barclays -- Analyst

Good morning, gentlemen. Congrats on the quarter. I just have a few questions. I wanted to follow-up on the ASK guidance, the international segment specifically. The 7-10% increase in this year, this assumes a kind of fourth quarter ramp up in the Miami and Orlando routes. And specifically, next year, a 34% increase. Does that assume additional routes? Or just the full ramp of the Florida routes?

Paulo Kakinoff -- Chief Executive Officer

Hi. Good morning, Petr. And thanks for the question. Actually, the combination of those. So, we are looking at the ASK [inaudible] routes basically due to the fourth quarter because that's the time when we are going to have six 737 MAX [inaudible]. So, we know that we are expanding our international routes making the most out of such capable new equipment like the 737 MAX. And you can reach 6,500 kilometers range, which gives us the opportunity to further expand our international by adding new destinations. So far, we have announced Miami and Orlando. But for 2019, we are going to have new international dealings being added. Including considering the current international [inaudible], the new aircraft has nine seats more than the 737 current [inaudible]. We know that we're going to reconfigure at the maximum [inaudible] load in order to keep the [inaudible]. And then, the 737NG and 737 MAX will deploy the same with [inaudible] seats each [inaudible]. On our current international routes, [inaudible] additional effect.

So, in summary, there's a community of growth. We have more ASP [inaudible] on the current network. We have the 737 MAX being able to [inaudible] to fly to new destinations. That's the reason why we are forecasting such a big ASK as we create other international routes. In 2019, we know we're going to have a much bigger number of 737 MAX being able to do those. [Inaudible] from 2019 on, it will be around 80% 737 MAX being incorporated to our fleet.

Petr Grishchenko -- Barclays -- Analyst

Got it. I guess I just want to follow-up on the aircraft ramp. It seems like you added like six aircraft this year. And why they were nearly unchanged.

Richard Lark -- Chief Financial Officer

Last year, we had -- I keep repeating this fact. In 2016, GOL reduced its fleet by 29 aircraft. And those aircraft were returned all the way into April of 2017. And so, there are additional costs in -- those aircrafts were taken out of operations in May of 2016. And so, the revenue's being generated along the new fleet size. But they still continue in the cost side and were gradually phased out through April of 2017. And since April of 2017, the company's been operating with this new operating-level fleet. But the company had those aircraft grounded. Was paying costs on those aircrafts and also had additional costs related to the early return of those aircrafts. And that affected the income statement all the way through April 2017. So, both on the rent side as well as on the maintenance side, those impacted higher levels operationally. Inefficiency, if you will. Inefficiency on the aircraft rent side. Per ASK and on a total basis, in the 2017 -- I'm sorry. In the 2016 numbers and in 2017 all the way through April.

So, it was a much lower efficiency that the company was operating at just given that it had this massive amount of aircraft in the return process as of April. As of May 2016, those aircraft were out of the revenues. And as of April of 2017, those aircraft were entirely out of the cost side of the income statement.

Petr Grishchenko -- Barclays -- Analyst

Okay. Got it. Then just last question. Just want to also follow-up on the fuel pricing. I see you assume, I think, around a 5% increase in fuel prices this year. And I'm just looking to benchmark. I think it's up over 20% so far this year. I'm wondering, does this include hedges? And if so, maybe you can elaborate on the balance hedged and the price as well?

Richard Lark -- Chief Financial Officer

No. This is really -- in Brazil, I mean -- you're probably looking at interna-- I don't know if you're looking at international oil prices. You have to remember that in Brazil, our jet fuel is denominated in Reais. And the specific mechanism of pricing of fuel is petrographs. So basically, once a month, there's a formula which updates the fuel prices which is based on the average jet 54 for the previous month and the average exchange rate. And so, both of those elements work together to determine our fuel price in Reais per liter. And so, you have to ha-- it's like I was saying on Dan's question. To understand that, you have to have a view on both oil and on currency to project the fuel price per liter. But the numbers we provided you guys basically will reflect our views on both of those. And we also have less volatility in Brazil on jet fuel. Because once a month, the fuel prices reset based on the previous month's jet 54 and exchange rates. And that's the price for the next 30 days. So, you only have 12 prices throughout the year. And so, they're thinking this is kind of how it works in Brazil.

So, we have less volatility. More predictability of the fuel. And we have higher taxes in Brazil than you see in international markets, higher fuel taxes. But we do have the benefit of a more stable foreseeable pricing mechanism. So, we spend a lot of our time forecasting oil prices in our risk management strategy. And also, on sales on currency. But those numbers that you see there are basically what we are working with this year in terms of our budget and providing to you guys to reflect upon. But international oil prices and currencies are extremely transparent. And you can put your own assumptions in there and play around with what you think you guys might speculate against this guidance toward what your views are on oil and on currency. As I was telling Dan, I think the currency side is easier. The harder is the oil side. So, we spend a lot of time on the oil side. And we work a lot with statistics and correlations on that. So that's basically -- the numbers you see there that we're providing to you guys are easy to speculate against. Because you have a lot of knowledge on oil prices and currency. But that's basically what we're working with in our process and giving you guys some visibility on that.

Petr Grishchenko -- Barclays -- Analyst

Great. Thanks a lot for the call. I just want to include the last question. Using your own guidance, you guys should be doing some cash this year. Right? And the [inaudible] that you show is roughly unchanged. So, we're just wondering, is that --?

Richard Lark -- Chief Financial Officer

Yeah. That's a good question. The way that works in the following. We have positive operating cash flow, neutral working capital. With our margin guidance -- basically, you have our margin guidance. We basically have neutralized the effects of working capital. And our CAPEX is fully financeable. So, part of that will depend on if we decide to fully finance the CAPEX. Which is mainly engine overhauls and the finalization of Wi-Fi and interior retrofits. But based on our assumptions, we expect to have some operating cash flow to continue to reduce leverage. And so, you're correct that we -- that number of three times there. But the one way we should be at the end of the year should definitely be in the 2.5 range. Maybe not on a full-year basis. Because we're still carrying a little bit in the first quarter of this year. But by the end of the year, we should be closer to that 2.5 number. Part of that will depend on the timing of what we do with amortizing our local currency adventures. As I was mentioning, our plan is to fully amortize those when they come due.

The next maturity is in October of this year. Then there's another maturity October of next year. So, part of it depends on if we falter on that in amortizing the adventures or not. If we do amortize the adventures and the adventures [inaudible] on cash, well, yeah. By the end of this year, we should be closer to that 2.5 level that we've got our GPIs on in 2019.

Petr Grishchenko -- Barclays -- Analyst

Got it. Thanks so much for the call. And best of luck to you guys.

Richard Lark -- Chief Financial Officer

Thanks.

Operator

Just a final reminder. To ask a question, please press * then 1 on a touchtone phone. The next question comes from Victor Mizusaki of Bradesco BBI. Please go ahead.

Victor Mizusaki -- Bradesco BBI -- Analyst

I have a few questions. The first one, I wanted to take a look at your guidance for internal revenues. And it basically jumped from 14.5% to almost 17% of total revenues. I don't know if you can give some color on what drives this growth? And the second one, when you take a look on your guidance and see effective tax rate, you've got actually yields for '18 and '19. Is this just for growth? Or the consolidated company?

Richard Lark -- Chief Financial Officer

Well, Victor. You should know that this is consolidated guidance. Could you repeat the first question?

Victor Mizusaki -- Bradesco BBI -- Analyst

Yeah. Because internal revenues [inaudible] total revenues were included. So, for this year, you talk about 13.5%, and you're at 17% of total revenues by 2019. So, is this something related to [inaudible]? Or is it somewhat [inaudible]? If you can find that revenues so [inaudible] --

[Crosstalk]

Richard Lark -- Chief Financial Officer

You're talking about the -- I'm sorry if I don't understand the question. You're asking about the cargo and other revenue. Is that what you're asking?

Victor Mizusaki -- Bradesco BBI -- Analyst

Yes.

Richard Lark -- Chief Financial Officer

You're trying to back into the Smiles revenue or something. Well, I think Smiles has provided some guidance on their revenues. So, you can kind of figure out that piece from the guidance that they're providing. We're also -- as you know, we've also developed some other additional revenue sources on other revenues that currently are not in the -- that were not in the full year last year. For example, post bag fees as well as our cargo business is growing at double-digit rates in the teens. So, a combination of those two factors plus what Smiles is doing is allowing us to increase the revenues there. But I'll leave it up to you guys to figure out if you want to round that down or up on that. I mean, we're giving you guys a little bit of a peek in the future. But you to figure out how much you want to go down or up on that 2 billion number there. I'll leave that up to you guys for the time being.

Victor Mizusaki -- Bradesco BBI -- Analyst

And the effective tax rate here is for [inaudible], right?

Richard Lark -- Chief Financial Officer

Say that again?

Victor Mizusaki -- Bradesco BBI -- Analyst

Your effective tax rate for '18 and '19 that you are [inaudible]. Is this for the group or for the airline business?

Richard Lark -- Chief Financial Officer

Oh, it's for the tax business. Okay. I'm sorry. I didn't understand your question. Again, all of these numbers are consolidated, all right? And so, what we're trying -- this was a request of -- many of you have requested help on understanding the tax -- how to understand taxes at GOL. Okay? And obviously, you know that Smiles is a full taxpayer. And GOL has $1 billion of NOLs. But it's a combination of factors. This reflects on a group basis. It includes what Smiles is paying. And it also includes the effects of the tax credits that exist on the GOL side. Now, you saw in the fourth quarter results, GOL is now starting on it's new [inaudible] or recognitions of the tax credits it already has on the balance sheets that have been impaired. They were impaired in recent years because of the business plan not justifying the full legalization. So, it basically wrote off -- over a period of time, wrote off about $1 billion of tax credits. So, it's a combination of those. But you guys have asked for some help on the taxes. And what I'm just providing here is that.

I'm just saying the effective group tax rate in terms of when you guys are looking at how you're going to do your modeling for earnings purposes is zero. You were saying, "Is that number this year or next year?" The purpose of providing this [inaudible] based on a request to help understand. And part of it is the complexity of that is that at one time we have a carved-out op sub that is a full taxpayer -- 34% income tax. And we have another business, which is the airline, which has a billion-dollar NOL which doesn't pay any taxes. And in fact, creates deferred tax income. So those two are basically offsetting. This is just a general guidance to you guys. For you guys that want to think about that and for those of you that are working on earnings projections. That was the purpose of providing that. I'm sorry. I didn't understand the question when you first asked it.

Victor Mizusaki -- Bradesco BBI -- Analyst

Okay. Thank you.

Operator

Excuse me. This concludes today's question and answer session. I would like to invite Mr. Kakinoff to proceed with his closing remarks. Please go ahead, sir.

Paulo Kakinoff -- Chief Executive Officer

Okay. I hope you found the presentation to be an exceptional help [inaudible] Investor Relations Team. [Inaudible] So thank you all very much.

Operator

This concludes the GOL Airlines Conference Call for today. Thank you very much for your participation. And have a nice day.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

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Contents:

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Welcome to GOL Airlines' Fourth Quarter 2017 Results Conference Call. This call is being recorded and all participants will be in a listen-only mode during the company's presentation. After GOL's remarks, there will be a question and answer session. At that time, further instructions will be given. Should any participant need assistance during this call, please press *0 to reach the operator. This event is also being broadcast live via webcast and may be accessed through the GOL website at www.voegol.com.br/ir and the MCIQ platform at www.MCIQ.com where the presentation is also available. Participants may view the slides in any order they wish. The replay will be available shortly after the event is concluded. Those following the presentation via the webcast may post their questions on the platform. Then their questions will either be answered by the management during this call or by the GOL Investor Relations Team after the conference is finished.

Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of GOL's management and on information currently available to the company. They involve risks and uncertainties because they relate to future events and therefore depend on circumstances that may or may not occur. Investors and analysts should understand that events related to macroeconomic conditions, industry, and other factors could cause results to differ materially from those expressed in such forward-looking statements. At this time, I will hand you over to Paulo Kakinoff. Please begin.

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This morning, we released our Q4 [inaudible]. After, it will be made available on GOL's Investor Relations website. Three videos, a repeat presentation, financial review, and [inaudible]. We hope this allows you a better understanding of our quarterly results at the moment we discover our [inaudible] release. Our hope is formally to give much more time in the conference call for questions and answers. Before beginning, I would like to highlight that we have significantly improved all indicators in the fourth quarter of '17. GOL's RPK increased by 8% from 9.3 billion in the fourth quarter '16 to 9.9 billion in the fourth quarter 2017. Mainly due to a 6.2% increase in the number of passengers. [Inaudible], the demand [inaudible], it's considered the [inaudible]. Average yield per passenger increased by 2.1% in this quarter compared to fourth quarter 2016 reaching 26.36 cents of Real. [Procedural?] remains conservative with the ASK increasing 3.5% compared to the Q4 '16.

[Inaudible] a 1.6% increase in pickups and a 1.8% [big lap] expansion. As a result, the average load factor in the fourth quarter grew 3.4 percentage points compared to the periods of 2016 reaching 81%. For the full year 2017, [hours per day?] increased by 3.6% primarily due to a 4.8% rise in [inaudible] with yield growing by 2.2%. ASK increased by only [inaudible]%. Load factor, we are 39.4%, 2.2 percentage points increase compared to 2016. GOL remains the industry leader in flights in quality. We are at 92.5% of flights on-time in fourth quarter. And 94.6% in 2017 according to [inaudible]. We continue to have a strong revenue growth. The combination of higher demand and [inaudible] resulted in net revenue for the quarter of R$3 billion, an increase of 11.8% quarter over quarter. For the full year 2017, revenue was R$10.6 billion, 7.2% higher than the prior year. GOL's current 2018 guidance is for net revenue of what outlooks will be R$11 billion. Our network serves higher yielding routes and has a medium share in the corporate flight segment.

We have currently the largest share of business traffic in the country. And we are optimistic about our prospects as the economy increases demand [inaudible]. We also remain committed to providing the best overall work travel experience. We designed our amenities to provide [inaudible] and interconnectivity. As well, there's also a marked number of flights in the main business destinations. This January, we've started selling tickets for GOL's four routes between Brazil and the United States from Brasilia and Fortaleza to Miami and Orlando. With that, I'm going to hand you over to Rich. He is going to take us through some more highlights.

Richard Lark -- Chief Financial Officer

Thanks, Kaki. First, we'd like to comment about our controlled cost environment. Total CASK in the quarter was 21.21 cents in Real. Just 1.4% higher than the same period of 2016. In spite of a less benign fuel environment, GOL remains a cost leader in South America for the 17th consecutive year. And our margins continue to expand. GOL's even margin continued to expand reaching 13% in the fourth quarter of 2017. Which is the highest fourth quarter indicator since 2011 and a 5.6 percentage points improvement over the same period in 2016. Operating income -- EBIT -- in 4Q '17 was R$388 million. An increase of 96% quarter over quarter. For the full year of 2017, even marginal was 9.4%, which was a growth of 2.3 percentage points compared to 2016. And operating income reached R$1 billion. GOL's current 2018 guidance is for an even margin of approximately 11%. EBITDA margin was 17.8% in 4Q '17 and 14.1% in 2017. A growth of 5.8 percentage points quarter over quarter and 2.5 percentage points year over year. EBITDA margin was 25.5% in 4Q '17 and 23% in 2017. An increase of 9 percentage points quarter over quarter and 1.3 percentage points year over year.

Operating cash flow generation was strongly positive by R$630 million with a record operating cash flow margin of 21%. Our highest since 2011. And for the full year 2017, GOL had an operating cash flow of R$1.7 billion with a 16% operating cash flow margin. On page 11 of our press release, we provided a summary of operating cash flow. Which helps you all reconcile that from the financial statements where there are two major adjustments. One is that in the financial statements from our [inaudible] perspectives, financial investments in cash securities are out of the operating cash flow. That needs to be added back. And also, as you know, GOL's in the final phase of heavy engine overhauls which are capitalized. And those are excluded from suppliers payable and put into the net investment line or the CAPEX line where we had approximately R$362 million in the fourth quarter of 2017. And so that reconciliation is provided for you on page 11 of the company's press release. And to finalize this brief review, we wanted to share the highlights of our balance sheet strengthening.

The net debt -- excluding perpetual bonds -- the last 12 months, EBITDA was 3.0 times in 4Q '17. Improving both versus the 3Q '17 where it was 3.4 times and the 4Q '16 when it was 4.2 times. Total liquidity -- including cash, financial investments, restricted cash, and accounts receivable -- totaled R$3.2 billion. Which is an increase of 51% versus September '17 and an increase of 66% versus December '16. The combinations of GOL's credit rating upgrades, successful notes offering, tender offers and redemptions, and improved cash liquidity substantially increased the company's financial flexibility while decreasing its blended cost of debt and increasing the average maturity of the company's indebtedness. On January 30, 2018, our GOL subsidiary, GOL Finance, priced an additional issue. A retap offering in the amount of $150 million of senior notes due 2025 with a coupon of 7% per year.

Regarding guidance, we expect to close 2018 with 1-3% growth in domestic ASKs over 2017. We projected a load factor of 79-80%. And Ex-fuel CASK of around 15 cents of Real. EBITDA and EBITDA margins in 2018 are expected to be around 16% and 11% respectively. Earnings per share are expected to be between R$1.20 and R$1.40. Earnings per ADS are expected to be between 75 cents and 90 cents on the dollar. For 2019, on a preliminary basis, we expect domestic capacity growth to be between 1-3% and non-fuel CASK to remain stable in relation to 2018. EBITDA margin is expected to be around 18%. And leverage is expected to be approximately 2.5 times. Now, I'd like to return the mike over to Kakinoff.

Paulo Kakinoff -- Chief Executive Officer

Thanks, Rich. We expect to continue to thrive in our efficiency and technological developments this year. We are configuring our terms with [inaudible] from 177 seats to 108 seats as well. And incorporating the new Boeing 737 MAX 8 in the second half of 2018. With a range of up to 6.5 thousand kilometers, the new 737 MAX 8 aircraft will allow GOL to offer nonstop flights from Brazil to any destination in Northern America. As well, [inaudible] recently announced its destinations in Florida. We remain focused on offering the best experience in [inaudible]. Providing extremely good service to our customers on new, modern aircraft that connect our main market with the most [inaudible]. Over 100 aircraft in our fleet have already been retrofitted with eco-leather seats. And more than 80 have on-board Wi-Fi and live TV. Our entertainment [inaudible] is the most complete and modern in Latin America and also offers a free entertainment catalogue.

We also offer our customers selfie check-in, GOL Conforto seats, and an extraordinary meal of on-board products while remaining a low-fare leader. To conclude, I would like to mention again that we made available on GOL's Investor Relations website three videos for [inaudible] presentation, financial review, and [inaudible] Q&A. As well as the full presentation and the earnings release. I want to say we'd highly appreciate your feedback of these new things being available. We hope these will provide a better understanding of our quarterly results. In addition, this format will give us much more time on the conference call for the questions and answers as we've got at this moment.

Questions and Answers:

Operator

Thank you. The floor is now open for questions. If you have a question, please press * then 1 on your touchtone phone at this or any time. If at any point your question is answered, you may remove yourself from the queue by pressing * then 2. Questions will be taken in the order they are received. We ask that when you post your question, that you pick up your handset to provide optimum sound quality. Please hold while we poll for questions. The first question comes from Michael Linenberg of Deutsche Bank. Please go ahead.

Catherine O'Brien -- Deutsche Bank -- Analyst

Good morning, gentlemen. It's actually Catherine O'Brien filling in for Mike. Thank you for sharing that 2018 and 2019 operating margin guidance. It's very helpful to put some context around what you're seeing for the next couple of years. Can you talk about if we should view 2019's 13% operating margin as a normalized level? Or are you expecting to see further improvement from there? Any color on your view of what GOL's average margin should be over the cycle would be really helpful. Thank you.

Richard Lark -- Chief Financial Officer

Yeah, I could. Well, the numbers we gave you, that's management guidance. You can use that as you see fit. But that's based on what we see. I'm not sure if I understood your question. But in terms of averages and so on, the company has recovered substantially its margins in 2017, as you can see. And we gave you guidance for '18. And that looks like basically what we see in terms of the combination of what we're planning on doing with our network specifically. But keep in mind, in 2019, we also start to get a larger portion of our fleet with the 737 MAX 8's, OK? They start coming in in July of this year. But it's a timid impact. But the MAX 8 for us in our figures, it's kind of like a double whammy for our economics. We get about a 3-4% annual cost reduction as we feather that into our fleet on the cost side. Mainly deriving out of the lower fuel consumption on the MAX -- 15% lower fuel consumption. But also, we get greater revenue productivity.

So, we also get a hit above the line, if you will, on the revenue side. Not just on cost, but also on revenues because of the greater productivity of the MAX. Not just in terms of a larger seat configuration. But also, in terms of what we expect in utilization, increase in average stage lengths. As you know, the MAX -- in addition to the 15% fuel economy on the cost side, it also has an average stage length of another thousand kilometers. Which allows us to increase revenues and is a key driver for us being able to add the Florida and international destinations that we're adding. So, it's a combination of those factors in addition to what we expect in terms of the overall macroeconomic environment that's really behind those numbers that we're providing to you on guidance. But that's based on what we can see into the future at this point.

Catherine O'Brien -- Deutsche Bank -- Analyst

Okay. Understood. Thanks a lot. I just meant are you thinking that 13% is peak margins? Or do you think the next five or ten years, you're going to average something more like 15%? Just kind of how you think about that longer term.

Richard Lark -- Chief Financial Officer

Yeah. We haven't provided any guidance on what peak margin would be. I think probably what you could do there -- given your guy's experience in the U.S. market and understanding of airline economics, kind of model that. In Brazil, we have a high concentration of business travelers. And in our network, we have an even higher concentration. We're the number one business airline in Brazil. So that gives us a relatively higher yielding traffic. But on top of the very same aircraft that you see companies like Southwest and Lion Air operating. You guys know those economics of Southwest and Lion Air very well. And I think mainly on the revenue side, I would say this is -- Brazil and especially in our network and our business, we have a very high component on the business travel, the corporate travel. Which is a higher yielding traffic cluster.

What I was just trying to say is that the key driver for us -- which is really the competitive advantage for GOL -- is what we're doing with the MAX aircraft. But you have now 17 years of history of GOL to kind of see where margins could go. Obviously, a key driver to that is also going to be solid capacity management. But that's what I would add in terms of contextualizing that.

Catherine O'Brien -- Deutsche Bank -- Analyst

Understood. Thanks. If I could just sneak one more quick one in. For your new service in Orlando and Miami, are you able to schedule those flights in a way to create connection opportunities with Delta to other U.S. destinations?

Richard Lark -- Chief Financial Officer

Yeah, of course. That's part of the partnership that GOL has with Delta is to -- not just on the Brazil side in Guarulhos and Galeao and airports in Brazil. But also, on the U.S. side to through connections with Delta through our partnership with them.

Catherine O'Brien -- Deutsche Bank -- Analyst

Okay. Thank you for the time.

Operator

The next question comes from Duane Pfennigwerth of Evercore ISI. Please go ahead.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Hey, thanks. Good morning. On the '18 capacity guidance, it's actually a bit less than what we were thinking. We were thinking more mid-singles. And it could just be that we were off base. But has your '18 capacity planning changed at all? Has it moderated a little bit? And then, can you give us any sense for the cadence of that by quarter?

[Crosstalk]

Paulo Kakinoff -- Chief Executive Officer

We [inaudible] on that and have developed and acquired a flexible way to observe capacity into a year. We are [inaudible] new travel opportunity through increased routes sustaining a higher load factor. And [inaudible] than expected. So, at the moment, we have been quite conservative regarding that. Because we don't know exactly how the [inaudible] the year will behave in this regard with the election period in Brazil and the [inaudible] connectivity. And coincidentally, it's possible [inaudible] for the East Coast destinations. So, what we have done so far is [inaudible] demand for the first quarter of the year. However, shortly we're going to [inaudible]. We are also pretty positive that the company has played a major role in keeping or influencing the capacity [inaudible] being a company as big as GOL is today. So, if we really have the right tools to quickly react, then that would be a key player in the chances [inaudible]. But it does not necessarily [inaudible] that we should do more [inaudible]. Richard, would you like to add something on this?

Richard Lark -- Chief Financial Officer

Yeah. Duane, I'll just add to that. Our plan is to grow domestic capacity GDP. And so, we're still feeling out the demand side of the equation here. We have the ability to increase that because we operate with a couple of aircraft that's subleasing that we can manage to bring back some additional capacity to capture additional upside on demand. And also, as we bring in the MAX to our fleet, we have the ability to adjust capacity on the rest of the fleet by the configuration. And so, we have pretty good mechanisms on the upside to manage that as we feel out demand. Now, in terms of the quarterly, we're not providing quarterly guidance on capacity. But we're going to be getting five additional aircraft in our fleet starting in July. They're all being dedicated to these flights from Fortaleza and Brasilia to South Florida. So, they're in the international bucket. They're not going to be in the demand bucket. And so, that's what I would comment on that.

Duane Pfennigwerth -- Evercore ISI -- Analyst

That's great. And then as you analyze these international markets and Florida specifically and you look at the prevailing fares -- and of course, it's going to adjust to these capacity changes. But what could fares look like on those routes today? What would you expect yields to look like on those routes relative to your system averages today?

Paulo Kakinoff -- Chief Executive Officer

That's very promising, at the moment. In spite of the fact that we have a huge regional international use. We've done the ASPs and we have [inaudible] industry, not GOL only. The market are at least reacting quite positively. And the main reason for that is that basically, what the [inaudible] industry has done is to cap the capacity [inaudible] in 2015, 2016 with the Brazilian Real devaluation. So, at the moment, the current trend of adding two-digit capacity on international routes will be capped for 2018 and 2019. And it seems to be across [inaudible] movement regarding routes.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Thank you.

Paulo Kakinoff -- Chief Executive Officer

Thank you very much.

Operator

The next question comes from Savi Syth of Raymond James. Please go ahead.

Matt Roberts -- Raymond James -- Analyst

Good morning, gentlemen. This is Matt Roberts on for Savi. I apologize if I missed this, Richard, in the prepared remarks. But could you describe again what really drove those below-maintenance per ASK value in 2017? Is that the right level going forward? And then just additional color on the one-time item from the 4Q '16 rent per ASK? Again, sorry if I missed that earlier.

Richard Lark -- Chief Financial Officer

Yeah. GOL's fleet returns ended in April 2017. So, in the 4Q of '16, they were higher maintenance expenses per ASK based on aircraft returns. And those were not present in the 4Q of '17. So that's why you see the reduction -- a relative reduction in the quarter over quarter period.

Matt Roberts -- Raymond James -- Analyst

Okay. Great. Thank you for that clarification there. And turning then over to your 2019 guidance. Given that there's a large step within capacity growth in 2019, it's somewhat surprising that your non-fuel CASK is expected to be flat. Is that an assumption of higher costs going into more international markets? Can you just provide some additional color into your thinking there? That'd be great. Thanks.

Richard Lark -- Chief Financial Officer

Well, to answer your question, the 737 MAX 8 creates large cost reductions for GOL. Not only do we have the 15% fuel economy, we also have greater revenue productivity via the higher stage length. And so that's pretty much what's driving the revenue growth with stable CASK. I don't know if that was your question. But that's how I would answer it.

Matt Roberts -- Raymond James -- Analyst

Yeah. It wasn't the question. I was just saying that the capacity growth is stepping up from 2018 to 2019. I thought maybe there would be some additional scale of the growth there that could reduce CASK. Is that not the case?

Richard Lark -- Chief Financial Officer

Well, no. The domestic capacity growth is growing pretty much at the same rate. The larger growth in the capacity of single [inaudible] is being driven by the international component of that. You start to have a larger component of the business. As we bring in the 737 MAX 8, we're going to be going from around 15% of our total [inaudible] today outside of Brazil domestic to a little over 20. And so, that comes in. Yes, there is going to be a stage-length effect in there -- a slightly larger stage-length effect. You know, 1,000 kilometers on that 20% of the network that's being done in international flights. But that's in that non-fuel cost guidance that we've provided. It's in those numbers.

Matt Roberts -- Raymond James -- Analyst

Okay. Thank you.

Operator

The next question comes from Dan McKenzie of Buckingham Research. Please go ahead.

Dan McKenzie -- Buckingham Research -- Analyst

Hey, good morning. Thanks, guys. Richard, I'd just follow-up on that last question. I wonder if you can just provide some perspective on the relative profitability of international overall versus domestic. Is the international flying, is that opportunity? Should we think of that as a higher margin opportunity versus domestic? I just wonder if you can help us understand the dynamic on that part of the network.

Richard Lark -- Chief Financial Officer

Yeah, sure. No. The domestic Brazil business has higher margins than the international long haul. Our main international today is South America. And so, Argentina, and Southern [inaudible], and that part. We'll be heading with the MAX out of Fortaleza and Brasilia flights up to South Florida. The relative profitability on those flights on an isolated basis is lower than the profitability we get on our domestic network. We're the largest domestic carrier with the best position and the best markets. And that has kind of put us in a position to be the number one business airline. Last year, we even passed competition in the top of the line category. And so, we're dealing with very high-yielding traffic in Brazil. It's not to say that the international traffic is also not profitable. But it has a lower profitability than our pure domestic traffic in our network. Speaking specifically about our network specifically. I'm not talking generally about the market. I'm talking specifically about the GOL network.

Dan McKenzie -- Buckingham Research -- Analyst

Understood. And then, I guess just with respect to your comment on business travel, I wonder if you could just elaborate a little bit further on that. Because what we've seen over the past year is political volatility that it has driven foreign exchange volatility. But the business travel trends seem to have held pretty steady. And I'm just wondering if there's some additional thoughts that you could just share as we think about 2018, 2019. What are the key drivers? What are you seeing across your network?

Richard Lark -- Chief Financial Officer

Yeah. I'll start, and I'll flip over to Kakinoff to finish it. We're seeing the key driver of domestic demand in this recovery obviously is first, the corporate travel. And I would say since October or so of last year, we're seeing the domestic demand more or less track the GDP expansion. We've seen the domestic demand since then in the kind of 5% growth rate overall. I'll ask Kaki to compliment that.

Paulo Kakinoff -- Chief Executive Officer

[Inaudible] we happen to be inside the cage where [inaudible] combination of a [inaudible] GDP, a very low inflation rate for Brazilian [inaudible] 5%. Now also a low prime rate. So, at that point, it's a benign environment. Not only toward the airline, but for other businesses in Brazil. So that's the main reason why the business demand is growing so fast. And in complement to that, it is important to notice that GOL is offering at this moment by far the best product to these specific market segments. We have the [inaudible]. We are leading on the [inaudible] airports in Brazil. We have the largest number of [inaudible] seats in [inaudible]. And the product has some unbeatable experiences being offered. Such as more leg room to economy class seats, leather seats, the [inaudible], selfie check-in, and the combination of meals and live TV in the air. So, we are not only making the most out of this benign environment, but actually have improved the market share among the corporate travelers. And this is because we have been able to attract those customers from the competition to fly with our flights. [Inaudible] pretty much complement anything in our capacity. Even including Florida in our market share among these customers.

Dan McKenzie -- Buckingham Research -- Analyst

Ah, very good. Thank you. And if I can just squeeze one more in. And that's just tied to foreign exchange or FX sensitivity for 2018. I'm wondering what the FX sensitivity is for this year just holding all else constant? And then I'm wondering if you can share what the FX parameters are you're factoring in for the high end or low end of your 2019 outlook? If all else equal, at what point we can begin to worry about reaching the lower end of that 2019 outlook looking at FX alone.

Richard Lark -- Chief Financial Officer

Looking at FX is not -- we don't think like that. So, I'd have to actually come up with an alternative universe. In our business, we have a combination of oil prices and FX working together. And that's how we manage the business. And so, you necessarily have to have an assumption on oil to calculate the FX in Brazil. So, we're assuming that the correlations will continue to work together. We have almost a perfect negative correlation between oil prices and Brazilian local currency. Yes, we probably have -- we expect the currency to scale out at the current levels where we are right now through the rest of the year. And that's reflected in the guidance that we've provided you. And we start with fuel and we're working with fuel. Kind of working between $56 to $63. [Inaudible] down to that level and kind of being most of this year at the higher end of that range. Closer to the $63. So, I think what I just said there, that's real to figure out what our view is.

Having said that, if the correlations were to hold, statistically, we should see a Real at or below $3 Reais by the end of this year if we continue with oil prices in the low $60s. But you should see Brazilian currency in the low $3s or even perhaps as low as $2.95 by the end of the year if the historical correlations between oil and currency hold. Having said that, we expect oil to continue at this kind of level through this year and currency to kind of be bouncing around at the level that it is right now. That's kind of what's reflected in the images that we're sharing with you. But if you were to use the statistics, like I said, you should probably see Real closer to the $3 level plus or minus.

Dan McKenzie -- Buckingham Research -- Analyst

Yeah. Thanks for the time, guys. That's very helpful.

Operator

The next question comes from Petr Grishchenko of Barclays. Please go ahead.

Petr Grishchenko -- Barclays -- Analyst

Good morning, gentlemen. Congrats on the quarter. I just have a few questions. I wanted to follow-up on the ASK guidance, the international segment specifically. The 7-10% increase in this year, this assumes a kind of fourth quarter ramp up in the Miami and Orlando routes. And specifically, next year, a 34% increase. Does that assume additional routes? Or just the full ramp of the Florida routes?

Paulo Kakinoff -- Chief Executive Officer

Hi. Good morning, Petr. And thanks for the question. Actually, the combination of those. So, we are looking at the ASK [inaudible] routes basically due to the fourth quarter because that's the time when we are going to have six 737 MAX [inaudible]. So, we know that we are expanding our international routes making the most out of such capable new equipment like the 737 MAX. And you can reach 6,500 kilometers range, which gives us the opportunity to further expand our international by adding new destinations. So far, we have announced Miami and Orlando. But for 2019, we are going to have new international dealings being added. Including considering the current international [inaudible], the new aircraft has nine seats more than the 737 current [inaudible]. We know that we're going to reconfigure at the maximum [inaudible] load in order to keep the [inaudible]. And then, the 737NG and 737 MAX will deploy the same with [inaudible] seats each [inaudible]. On our current international routes, [inaudible] additional effect.

So, in summary, there's a community of growth. We have more ASP [inaudible] on the current network. We have the 737 MAX being able to [inaudible] to fly to new destinations. That's the reason why we are forecasting such a big ASK as we create other international routes. In 2019, we know we're going to have a much bigger number of 737 MAX being able to do those. [Inaudible] from 2019 on, it will be around 80% 737 MAX being incorporated to our fleet.

Petr Grishchenko -- Barclays -- Analyst

Got it. I guess I just want to follow-up on the aircraft ramp. It seems like you added like six aircraft this year. And why they were nearly unchanged.

Richard Lark -- Chief Financial Officer

Last year, we had -- I keep repeating this fact. In 2016, GOL reduced its fleet by 29 aircraft. And those aircraft were returned all the way into April of 2017. And so, there are additional costs in -- those aircrafts were taken out of operations in May of 2016. And so, the revenue's being generated along the new fleet size. But they still continue in the cost side and were gradually phased out through April of 2017. And since April of 2017, the company's been operating with this new operating-level fleet. But the company had those aircraft grounded. Was paying costs on those aircrafts and also had additional costs related to the early return of those aircrafts. And that affected the income statement all the way through April 2017. So, both on the rent side as well as on the maintenance side, those impacted higher levels operationally. Inefficiency, if you will. Inefficiency on the aircraft rent side. Per ASK and on a total basis, in the 2017 -- I'm sorry. In the 2016 numbers and in 2017 all the way through April.

So, it was a much lower efficiency that the company was operating at just given that it had this massive amount of aircraft in the return process as of April. As of May 2016, those aircraft were out of the revenues. And as of April of 2017, those aircraft were entirely out of the cost side of the income statement.

Petr Grishchenko -- Barclays -- Analyst

Okay. Got it. Then just last question. Just want to also follow-up on the fuel pricing. I see you assume, I think, around a 5% increase in fuel prices this year. And I'm just looking to benchmark. I think it's up over 20% so far this year. I'm wondering, does this include hedges? And if so, maybe you can elaborate on the balance hedged and the price as well?

Richard Lark -- Chief Financial Officer

No. This is really -- in Brazil, I mean -- you're probably looking at interna-- I don't know if you're looking at international oil prices. You have to remember that in Brazil, our jet fuel is denominated in Reais. And the specific mechanism of pricing of fuel is petrographs. So basically, once a month, there's a formula which updates the fuel prices which is based on the average jet 54 for the previous month and the average exchange rate. And so, both of those elements work together to determine our fuel price in Reais per liter. And so, you have to ha-- it's like I was saying on Dan's question. To understand that, you have to have a view on both oil and on currency to project the fuel price per liter. But the numbers we provided you guys basically will reflect our views on both of those. And we also have less volatility in Brazil on jet fuel. Because once a month, the fuel prices reset based on the previous month's jet 54 and exchange rates. And that's the price for the next 30 days. So, you only have 12 prices throughout the year. And so, they're thinking this is kind of how it works in Brazil.

So, we have less volatility. More predictability of the fuel. And we have higher taxes in Brazil than you see in international markets, higher fuel taxes. But we do have the benefit of a more stable foreseeable pricing mechanism. So, we spend a lot of our time forecasting oil prices in our risk management strategy. And also, on sales on currency. But those numbers that you see there are basically what we are working with this year in terms of our budget and providing to you guys to reflect upon. But international oil prices and currencies are extremely transparent. And you can put your own assumptions in there and play around with what you think you guys might speculate against this guidance toward what your views are on oil and on currency. As I was telling Dan, I think the currency side is easier. The harder is the oil side. So, we spend a lot of time on the oil side. And we work a lot with statistics and correlations on that. So that's basically -- the numbers you see there that we're providing to you guys are easy to speculate against. Because you have a lot of knowledge on oil prices and currency. But that's basically what we're working with in our process and giving you guys some visibility on that.

Petr Grishchenko -- Barclays -- Analyst

Great. Thanks a lot for the call. I just want to include the last question. Using your own guidance, you guys should be doing some cash this year. Right? And the [inaudible] that you show is roughly unchanged. So, we're just wondering, is that --?

Richard Lark -- Chief Financial Officer

Yeah. That's a good question. The way that works in the following. We have positive operating cash flow, neutral working capital. With our margin guidance -- basically, you have our margin guidance. We basically have neutralized the effects of working capital. And our CAPEX is fully financeable. So, part of that will depend on if we decide to fully finance the CAPEX. Which is mainly engine overhauls and the finalization of Wi-Fi and interior retrofits. But based on our assumptions, we expect to have some operating cash flow to continue to reduce leverage. And so, you're correct that we -- that number of three times there. But the one way we should be at the end of the year should definitely be in the 2.5 range. Maybe not on a full-year basis. Because we're still carrying a little bit in the first quarter of this year. But by the end of the year, we should be closer to that 2.5 number. Part of that will depend on the timing of what we do with amortizing our local currency adventures. As I was mentioning, our plan is to fully amortize those when they come due.

The next maturity is in October of this year. Then there's another maturity October of next year. So, part of it depends on if we falter on that in amortizing the adventures or not. If we do amortize the adventures and the adventures [inaudible] on cash, well, yeah. By the end of this year, we should be closer to that 2.5 level that we've got our GPIs on in 2019.

Petr Grishchenko -- Barclays -- Analyst

Got it. Thanks so much for the call. And best of luck to you guys.

Richard Lark -- Chief Financial Officer

Thanks.

Operator

Just a final reminder. To ask a question, please press * then 1 on a touchtone phone. The next question comes from Victor Mizusaki of Bradesco BBI. Please go ahead.

Victor Mizusaki -- Bradesco BBI -- Analyst

I have a few questions. The first one, I wanted to take a look at your guidance for internal revenues. And it basically jumped from 14.5% to almost 17% of total revenues. I don't know if you can give some color on what drives this growth? And the second one, when you take a look on your guidance and see effective tax rate, you've got actually yields for '18 and '19. Is this just for growth? Or the consolidated company?

Richard Lark -- Chief Financial Officer

Well, Victor. You should know that this is consolidated guidance. Could you repeat the first question?

Victor Mizusaki -- Bradesco BBI -- Analyst

Yeah. Because internal revenues [inaudible] total revenues were included. So, for this year, you talk about 13.5%, and you're at 17% of total revenues by 2019. So, is this something related to [inaudible]? Or is it somewhat [inaudible]? If you can find that revenues so [inaudible] --

[Crosstalk]

Richard Lark -- Chief Financial Officer

You're talking about the -- I'm sorry if I don't understand the question. You're asking about the cargo and other revenue. Is that what you're asking?

Victor Mizusaki -- Bradesco BBI -- Analyst

Yes.

Richard Lark -- Chief Financial Officer

You're trying to back into the Smiles revenue or something. Well, I think Smiles has provided some guidance on their revenues. So, you can kind of figure out that piece from the guidance that they're providing. We're also -- as you know, we've also developed some other additional revenue sources on other revenues that currently are not in the -- that were not in the full year last year. For example, post bag fees as well as our cargo business is growing at double-digit rates in the teens. So, a combination of those two factors plus what Smiles is doing is allowing us to increase the revenues there. But I'll leave it up to you guys to figure out if you want to round that down or up on that. I mean, we're giving you guys a little bit of a peek in the future. But you to figure out how much you want to go down or up on that 2 billion number there. I'll leave that up to you guys for the time being.

Victor Mizusaki -- Bradesco BBI -- Analyst

And the effective tax rate here is for [inaudible], right?

Richard Lark -- Chief Financial Officer

Say that again?

Victor Mizusaki -- Bradesco BBI -- Analyst

Your effective tax rate for '18 and '19 that you are [inaudible]. Is this for the group or for the airline business?

Richard Lark -- Chief Financial Officer

Oh, it's for the tax business. Okay. I'm sorry. I didn't understand your question. Again, all of these numbers are consolidated, all right? And so, what we're trying -- this was a request of -- many of you have requested help on understanding the tax -- how to understand taxes at GOL. Okay? And obviously, you know that Smiles is a full taxpayer. And GOL has $1 billion of NOLs. But it's a combination of factors. This reflects on a group basis. It includes what Smiles is paying. And it also includes the effects of the tax credits that exist on the GOL side. Now, you saw in the fourth quarter results, GOL is now starting on it's new [inaudible] or recognitions of the tax credits it already has on the balance sheets that have been impaired. They were impaired in recent years because of the business plan not justifying the full legalization. So, it basically wrote off -- over a period of time, wrote off about $1 billion of tax credits. So, it's a combination of those. But you guys have asked for some help on the taxes. And what I'm just providing here is that.

I'm just saying the effective group tax rate in terms of when you guys are looking at how you're going to do your modeling for earnings purposes is zero. You were saying, "Is that number this year or next year?" The purpose of providing this [inaudible] based on a request to help understand. And part of it is the complexity of that is that at one time we have a carved-out op sub that is a full taxpayer -- 34% income tax. And we have another business, which is the airline, which has a billion-dollar NOL which doesn't pay any taxes. And in fact, creates deferred tax income. So those two are basically offsetting. This is just a general guidance to you guys. For you guys that want to think about that and for those of you that are working on earnings projections. That was the purpose of providing that. I'm sorry. I didn't understand the question when you first asked it.

Victor Mizusaki -- Bradesco BBI -- Analyst

Okay. Thank you.

Operator

Excuse me. This concludes today's question and answer session. I would like to invite Mr. Kakinoff to proceed with his closing remarks. Please go ahead, sir.

Paulo Kakinoff -- Chief Executive Officer

Okay. I hope you found the presentation to be an exceptional help [inaudible] Investor Relations Team. [Inaudible] So thank you all very much.

Operator

This concludes the GOL Airlines Conference Call for today. Thank you very much for your participation. And have a nice day.

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